An optimization scenario methodology for bank asset liability management

Asset-liability management is one of the most important issues in bank strategic planning. This study presents an Asset Liability Management methodology in a stochastic interest-rate environment. The intention is to develop an optimization tool for interest rate scenarios and to determine the optimal balance among profitability, risk, liquidity and other uncertainties by considering several goals, such as the maximization of returns, the minimization of risk, the maintenance of a desirable level of liquidity and solvency, the expansion of deposits and loans. The model is verified using data from a large commercial bank of Greece over the period 1999.